Starbucks' Q4 2025: Contradictions Emerge on Staffing/Service Strategy, Store Closure Margins, Pricing Value, Marketing Impact, and Operational Innovation

Date of Call: October 29, 2025

Financials Results

• Revenue: $9.6B, up 5% YOY
• EPS: $0.52 per share, down 34% YOY
• Operating Margin: 9.4%, down 500 basis points YOY

Guidance:

• Q1 expected to be led by positive transaction comps (holiday momentum).
• U.S. comps should build through fiscal 2026 but recoveries may be non‑linear.
• Green Apron Service investments will annualize through FY2026; assistant store manager rollout to scale.
• Consolidated G&A in fiscal 2026 expected to run lower than fiscal 2023 as support streamlining offsets investments.
• Coffee prices and tariffs are headwinds through H1 FY2026 with potential relief in the back half of the year.
• Near‑ and longer‑term guidance to be provided at Investor Day in late January.

Business Commentary:

* Global Revenue and Sales Growth: - Starbucks reported consolidated revenue of $9.6 billion for Q4, marking 5% year-over-year growth, with a 1% increase in global comparable store sales. - The growth was driven by international outperformance and positive comps in Canada, while the U.S. business showed flat year-over-year sales.

• U.S. Market Turnaround:
• The company's U.S. comparable store sales were flat year-over-year, with a 4% sequential improvement in transaction comps.

• This trend was attributed to the implementation of Green Apron Service, which improved customer experience and store operations.

• International Segment Performance:

• Starbucks' international segment achieved 9% year-over-year net revenue growth, reaching $2.1 billion in Q4.

• Growth was led by strong comp sales in China, Japan, the U.K., and Mexico, driven by product innovation and expanding delivery services.

• Strategic Store Adjustments:

• Starbucks completed 107 net store closures globally as part of restructuring efforts, focusing on coffee houses unable to meet customer experience or profitability standards.
• This was driven by a strategic portfolio assessment to concentrate on profitable and community-engaged locations, aiming to improve overall profitability.

Sentiment Analysis:

Overall Tone: Positive

• Management: "the plan is working" and called Q4 "the first positive quarter in 7 quarters." CFO: Q4 revenue $9.6B, up 5% YOY; EPS $0.52, down 34% YOY. Management repeatedly emphasized momentum from Green Apron Service, improving transactions, and a path to top‑line growth with earnings to follow.

Q&A:

• Question from David Palmer (Evercore ISI): Is 'Back to Starbucks' focused only on cafe traffic versus other channels, and are you seeing differences in comps by channel/order type?
  Response: Back to Starbucks is comprehensive across cafe, drive‑thru, mobile and delivery; Green Apron Service supports all access modes and drove transaction‑led positive comps in September, boosting transactions across channels.

• Question from Danilo Gargiulo (Sanford C. Bernstein): How has the protein platform been received and is its pricing sustainable into 2026?
  Response: Early reception is very positive; customers view protein as good value and customizable, driving awareness and incremental traffic—management is optimistic it will scale without signaling broad price increases.

• Question from David Tarantino (Robert W. Baird): Where are you in the Green Apron rollout and how do pilot stores compare to later rollouts?
  Response: About 8–9 weeks into the broad rollout; the initial 650 pilot stores continue to outpace others, and management expects week‑to‑week improvement as staffing, rosters and partner proficiency scale.

• Question from John Ivankoe (JPMorgan): Was Green Apron defensive (fixing gaps) or offensive (driving traffic), and can it be expanded further?
  Response: It addressed execution gaps (sequencing and staffing) and is both defensive and offensive; Smart Queue plus added hours improved service and customer perception, and improved performance should self‑fund further enhancements.

• Question from Lauren Silberman (Deutsche Bank): What's driving flat morning transaction outperformance and how should we view afternoon performance vs macro/competition?
  Response: Morning outperformance is driven by better staffing and faster throughput under Green Apron; afternoon is improving sequentially as staffing and product initiatives roll out, with further menu/food work planned to drive afternoons.

• Question from Brian Harbour (Morgan Stanley): Are incremental staffing investments for Green Apron complete and how do commodity pressures offset planned savings?
  Response: Initial Green Apron investments are in place and will annualize; management does not expect major additional staffing spend to maintain the standard; coffee prices remain elevated and are a near‑term headwind with expected relief later in the year.

• Question from Sara Senatore (BofA Securities): Why were stores closed (AUV vs costs) and what's the impact on sales transfer and margins?
  Response: Closures were driven primarily by inadequate top‑line (AUV) and inability to deliver the desired customer experience; closures are slightly accretive, sales transfer exceeded expectations, and remaining stores must meet stronger unit economics.

• Question from Jeffrey Bernstein (Barclays): Any early guardrails for fiscal 2026 top/bottom line or cost‑savings magnitude?
  Response: No quantitative guardrails provided; management will deliver FY26 and longer‑term guidance at Investor Day — priority is top‑line growth first with earnings to follow and cost actions underway to improve transaction profitability.

• Question from Andrew Charles (TD Cowen): How do improved value perceptions affect 2026 pricing plans and how should we model Q1 comps?
  Response: Pricing will be targeted and strategic rather than broad; Q1 is expected to be led by positive transaction comps (holiday), while earnings will lag as Green Apron investments annualize.

• Question from Hyun Jin Cho (Goldman Sachs): How have under‑35 consumers behaved recently and is this cohort a near‑term headwind?
  Response: Under‑35 customers showed positive transaction and sales response in the quarter; management sees them as more choiceful but believes improved experience and value will retain and reengage this cohort.

• Question from Andrew Barish (Jefferies): What emerged from meetings with license partners and can the license business be streamlined to help company stores?
  Response: Management sees growth opportunity in the license business, is restructuring support to tailor execution, and plans to scale licensed units while raising operational standards to align with Green Apron.

• Question from Christopher O'Cull (Stifel): How does increased competition from emerging beverage concepts affect strategy?
  Response: Management frames competition as forcing improvement; Starbucks' scale across drive‑thru, mobile and cafe plus emphasis on craft and connection is viewed as the competitive advantage to stay on offense.

Contradiction Point 1

Staffing and Service Improvement Strategy

It involves changes in the company's approach to staffing and service improvements, which are crucial for maintaining customer satisfaction and operational efficiency.

How is the Green Apron Service progressing now? How does it compare to earlier implementations? - David Tarantino (Baird & Co.)

2025Q4: Green Apron Service has been implemented since mid-August, showing positive week-to-week growth due to better staffing and customer experience. - [Brian Niccol](CEO)

How do operational improvements affect store performance, and what percentage of stores meet efficiency targets? - Danilo Gargiulo (Bernstein)

2025Q1: We are not experiencing significant capacity issues in most stores. Capacity is available. - [Brian Niccol](CEO)

Contradiction Point 2

Impact of Store Closures on Margins

It pertains to the financial impact of store closures, which affects operational costs and overall profitability.

How will store closures affect revenue and margins over time? What are expected future margins? - Sara Senatore (BofA Securities)

2025Q4: Closures are slightly accretive to margins. - [Catherine Smith](CFO)

Does Starbucks still see a $4 billion productivity opportunity? - David Palmer (Evercore ISI)

2025Q1: As a result of these efforts, we are pleased to note that our Q1 '25 operating margin of 16.5% improved 120 basis points compared to the prior year. - [Rachel Ruggeri](CFO)

Contradiction Point 3

Pricing Strategy and Value Perception

It involves changes in pricing strategy and value perception, which are critical for maintaining customer loyalty and revenue growth.

How is the protein platform being received? What is your pricing architecture for sustainability post-2026? - Danilo Gargiulo (Sanford C. Bernstein & Co.)

2025Q4: Pricing will be strategic and targeted, considering inflation and customer value perceptions. No broadscale pricing is planned. - [Brian Niccol](CEO)

How does innovation impact pricing and value for new products, and what is the pricing strategy moving forward? - Jon Michael Tower (Citi)

2025Q3: Innovation will not negatively impact key customer metrics. It is built with partners, ensuring execution meets barista and customer expectations. The innovation approach will maintain operational efficiency and enhance customer engagement. - [Brian Niccol](CEO)

Contradiction Point 4

Impact of Marketing Strategy on Sales

It deals with the effectiveness of marketing strategies and their impact on sales performance, which are critical for revenue growth.

Is the Back to Starbucks strategy solely focused on traditional in-store coffee experiences that may no longer drive business growth as effectively, and what specific efforts are being made to address this? - David Palmer (Evercore ISI)

2025Q4: The success of Green Apron Service is evident as it improved transactions, leading to positive comps in September. - [Brian Niccol](CEO)

Was the sales improvement structural or comparison-related? - David Tarantino (Baird)

2025Q1: Sequential improvement throughout the quarter; moved away from discounting to broader marketing, which increased non-Rewards customer traffic and morning daypart improvements. - [Brian Niccol](CEO)

Contradiction Point 5

Operational Improvement and Innovation

It highlights changes in Starbucks' approach to operational improvement and innovation, which could impact customer experience and growth potential.

What is driving the morning outperformance? Are macro or competitive factors impacting the afternoon? - Lauren Silberman (Deutsche Bank)

2025Q4: Morning improvements are due to better staffing and service times, leading to sequential improvement in midday and afternoon. There's opportunity in afternoon offerings, and staffing levels now support consistent service quality throughout the day. - [Brian Niccol](CEO)

How does innovation align with pricing and value for new products, and what is the forward pricing strategy? - Jon Michael Tower (Citi)

2025Q3: Innovation will not negatively impact key customer metrics. It is built with partners, ensuring execution meets barista and customer expectations. The innovation approach will maintain operational efficiency and enhance customer engagement. - [Brian Niccol](CEO)